Construction industry faces a long recovery

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Many economists downplayed May’s disappointing jobs report, calling it a blip in a moderate recovery and blaming high gas prices and Japanese supply disruptions. But construction, a key sector that has lagged the overall job market, is likely to continue to do so even when job growth picks up again, reports USA Today.

Construction’s malaise could hurt overall gains, even if the economy rapidly regains its pre-May pace of about 200,000 more jobs a month. Home building ripples through such industries as appliances and furniture.

“The construction industry will continue to experience double-digit unemployment rates for a long time,” says Ken Simonson, chief economist for Associated General Contractors of America.

Construction firms added 2,000 jobs in May, while all U.S. payrolls grew by 54,000. Yet, while all employers added 1.8 million jobs since February 2010, construction lost 4,000. Its payrolls of 5.5 million are down 2.2 million since 2007.

Its 16.3% jobless rate is also down from 22% a year ago. That’s because many discouraged workers stopped looking or switched to trucking or manufacturing, Simonson says.

The problem: Housing starts are anemic due to tight lending standards and foreclosures that swell inventories and depress prices, says economist David Crowe of the National Association of Home Builders.

Public construction that propped up the industry when commercial work disappeared in the recession is ending as the federal stimulus winds down and states slash budgets.
Hospital, university and utility projects are rebounding. Office and retail work should tick up in 2011, says Patrick Newport of IHS Global Insight. But the gains won’t offset public cutbacks, Simonson says. He cut his estimate for 2011 industry job growth to 100,000 from 250,000. Read More.

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